Fixed price
Revenue may be stable while extra effort reduces forecast margin.
Project economics
A practical project profitability calculation for client work.
Connect revenue, labor cost, expenses, remaining effort, and commercial terms to understand current and forecast margin.
Start with revenue minus delivery cost.
Project profit is recognized or forecast revenue minus labor cost, project expenses, and other attributable delivery costs. Profit margin is project profit divided by revenue. The useful version of this calculation includes both actual evidence and the expected cost to finish.
Make the basis of every number explicit.
- ✓Commercial model and agreed revenue
- ✓Actual approved time at effective cost rates
- ✓Billable and non-billable project expenses
- ✓Remaining effort at expected cost rates
- ✓Known scope changes, caps, retainers, or milestones
- ✓Currency and reporting period
Interpret margin differently by contract.
Time and materials
Revenue may grow with billable work, but utilization, write-offs, and rate mix still matter.
Retainer
Capacity consumption and rollover rules can matter as much as recorded hours.
Review the forecast before the project is finished.
A declining forecast margin should trigger a scope, staffing, rate, quality, or delivery discussion while options remain. Record the decision and preserve the prior forecast for learning.